McDonald’s may generate a modest profit from its $5 meal deal, with profit margins expected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold, according to restaurant analyst Mark Kalinowski.
This strategy is aimed at attracting inflation-sensitive consumers back to the restaurant, with hopes that once inside, they will purchase more items beyond the $5 offer.
However, profitability will be influenced by various factors such as ingredient costs, labor, and operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, describes the $5 meal deal as “more promotional than profitable.”
While the deal aims to draw diners back to McDonald’s, its impact on franchisee profits remains uncertain. About 95% of McDonald’s outlets are franchise-owned, meaning that franchisees have control over pricing and face additional costs, including rent, insurance, permits, and taxes.
In May, U.S. president Joe Erlinger noted that franchisees often run promotional deals like the $5 meal to offset rising overhead costs. Nonetheless, Spiegel points out that this offering acts more as a “loss leader to capture and re-capture guests.”
When factoring in expenses such as labor, packaging, condiments, delivery, and marketing, Spiegel stated that owners may effectively eliminate any profit from the deal.